If Stranger Things has made you nostalgic for the 80’s there’s another feature of the 80’s that’s making a comeback: rent concessions. In the 100 markets that we are tracking effective rents, at least half of them have more properties offering concessions this year than at this time last year.
Tucson leads the pack with more than 40% of the properties offering some type of concession. Las Vegas is next with 33.6% of properties offering rent discount. However, in these two markets, I have a feeling that is just residual habits from the recession. Both of those markets were late in the recovery and have seen a decline in the numbers of properties offering concessions in the last year.
Other markets, however, are telling a different story. Some are in energy economy dependent markets and others are in danger of oversupply, and new construction lease-ups are pushing concessions up. Markets like Midland-Odessa, Oklahoma City, Houston and Tulsa all had significantly more properties offering concessions this year. Markets that are experiencing a lot of new construction like Denver, Miami, Austin and Asheville are also seeing a major increase in properties offering discounts on their market rents.
We are also seeing a lot of growth in the average concession package being offered in many markets as well. Again, it’s no surprise that markets like Houston and Midland-Odessa are topping the list of market concessions. But even markets like San Diego and Pittsburgh are offering discounts in the 7% range, which is more than 3½ weeks on a year lease. The Tennessee markets of Nashville and Chattanooga have seen major increases in the average concession packages being offered.
To be sure, some markets like Atlanta are seeing fewer properties offering concessions but overall the winds are blowing in a different direction.
The increase in both the number of properties offering concessions and the average concession package could just be an indication of the increased volume of Lease-ups. However, looking at the stabilized properties we are seeing the both the volume and value of concessions increase as well. As competition heats up in 2017, we may be seeing discounts that we haven’t seen since the recession.